Chinese economic growth remained stable in Q3 2016

Chinese economic growth remained stable in Q3 2016 at level of 6.7% yoy, which increases the chance authorities to achieve their goal of annual growth of 6.5-7.0%, and to fulfill the promise to rein in lending and rising property prices. The economic growth of 6.7% yoy justify the expectations of economists and markets. The services sector expanded in the first nine months of the year, recording an increase of 7.6%.

The stabilizing growth gives space for action over monetary policies designed to reduce indebtedness and risks in the financial system, which calls on the International Monetary Fund (IMF). Last week, authorities in Beijing have published guidelines for debt reduction. However, the previous promises have been ignored because the velocity lending promote housing prices in major cities in China.

The data for economy growth showed that Chinese economy continues shifting towards consumer spending. The growth in retail sales (10.7%) exceeds those of industrial production (6.1%). The investment costs, however, continue to be promoted by the public sector (21.1%) and downtrodden business expenses (2.5%) indicate a problem with high levels of indebtedness. For the period January-September investment in fixed assets increased by 8.2 percent.

The companies in the property sector have benefited from the growth of prices in major cities. The completed investment in construction of properties increased by 5.8% since the beginning of the year to the end of September. For comparison, however, the value of new residential sales in China grew by 61% yoy in September, which strikes on Beijing’s efforts to control the boom. At least 21 cities across the country have introduced restrictions on purchases of housing and tightened conditions for mortgage lending in the past year. Thus local administrations actually reverse the trend of the previous two years to assist potential buyers.

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